The MDA and KPMG recently brought us their much-coveted Construction Industry and Property Market Report. The glossy magazine was distributed to the attendees of the ‘Future of Malta’s Property Market’ event, which took place the 28th of October at the Intercontinental.
If you are here looking for a succinct summary of the report, here’s the shortest we can make it: the building industry appears to have recovered after a trying time, but is facing external cost pressures that have not yet fully materialised and spread throughout the market.
Now, many of the ‘industry viewpoints’ underlined on the executive summary will be familiar to those that attended MARE Summit 2022.
As our speakers on the Real Estate investment panel pointed out, during the pandemic, government property schemes were found to be critical in boosting demand for property.
The panel on emerging trends on the local building and construction market had already highlighted several problems regarding the labour market. Unfortunately, and as the report shows, it has shown little improvement, with issues like employee retention, a lack of both skilled and unskilled workers, and ongoing pay pressures persisting to this day, a tendency intensified with many expats leaving Malta during the pandemic. The skills and capacity mismatch are anticipated to persist for the foreseeable future and could have an impact on the pricing and quality of the job.
Changes in consumer behaviour were hinted at on our panel on architecture. The COVID-19 pandemic and an increase in work-from-home practices have primarily caused a shift in consumer priorities when looking for properties. This presents an opportunity for the industry to improve the quality of market offerings, as consumers now value homes with home offices, outdoor space, and energy-saving features.
When it comes to commercial Real Estate, the hybrid working arrangement, which gained popularity during the pandemic, seemed to have negatively influenced this segment of the market, a tendency which was identified on our panel on office space.
The issue of construction waste, which made an appearance on our panel about sustainable building, was also mentioned in the report. Dumping costs have risen dramatically as a result of a critical lack of space. While operators are exploring and implementing recycling measures to reduce waste, they admit that available solutions are still somewhat expensive or not entirely practical. Financial assistance to operators in this sector, as well as the ERA’s adoption of the Construction and Demolition Waste Strategy, should be a key starting point on the path to sustainable waste practices.
The report also dived into a topic which has been extensively talked about lately, which is that of affordability and the pressure that is exerting on the Property market. The role that the Government has been playing to keep this problem at bay was mentioned and discussed during Hon. Roderick Galdes’ speech and the panel on socially sustainable cities.
Another hot topic in the construction industry is that of ESG. The report acknowledges the challenge it poses, with a concerted effort required on the part of all industry stakeholders to enact and implement ESG principles throughout the sector. Technology and innovation are singled out as essential components of the ESG transformation, which can significantly improve the environmental credentials of the sector. ESG benefits extend beyond enhancing social and environmental well-being however, with the potential to boost businesses’ long-term profitability. Early ESG adoption has many benefits, including lower supply, waste, and energy costs, enhanced brand reputation, easier access to financing, and advanced regulatory alignment with impending European directives.
The report lobes some interesting questions that are still in need of evidence-based answers. Who will bear the brunt for the rising prices of raw materials? Will it result in higher house prices, impacting affordability, particularly in light of possible upcoming interest rate hikes? How will it impact the rental market? Given the effort required to embed ESG across the entire value chain, would such cost pressures prevent the industry from adopting ESG principles, or could ESG be used to add value?